Economic reforms bring hopes - and risks - to Africa

Washington
— Many of Africa's nations are making the most significant and risky economic reforms since their days of independence some 20 to 30 years ago. These reforms are aimed at halting a devastating decline in Africa's overall economic situation and at providing a better life for their citizens - more food, more jobs, and better health and education.

The reforms include trimming government payrolls, cutting government subsides on food and other basics, selling many state-run industries and services, slashing the value of inflated currencies, and spending more on agriculture.

If carried out, they will put some two-thirds of Africa's sub-Saharan nations more firmly than ever before in the Western, capitalistic category, leaving many plans for African socialism far behind.

The United States State Department ranks the following countries as the top 10 in terms of numbers of reform measures adopted: Ghana, Madagascar, Malawi, Mali, Nigeria, Senegal, Somalia, Tanzania, Zaire, and Zambia.

But the reforms include some steps, such as massive layoffs and higher food prices, that could cause a political backlash, analysts point out. Riots in Zambia earlier this year, caused by a rise in food prices after subsidies were cut, forced the government to back down and lower prices.

And there are concerns among both African and Western officials as to whether there will be enough international assistance to support the nations during the economic transition period that these reforms are intended to spawn. There is also some concern about whether the reforms will even be effective.

In Latin America, where some of these reforms have also being tried, problems have arisen, says one World Bank analyst. Selling state-run industries is not easy. If the price is too high, it is unattractive; if too low, critics say friends of the government are being given a good deal, the analyst says.

The reforms have helped some Latin American countries, the analyst notes. But for the poorer countries, the reforms are not enough - people remain very poor. Also needed in these countries, says this analyst, are debt relief and private investment which might be encouraged by the debt relief.

Despite such skepticism, this is ``a profoundly hopeful moment'' for Africa, says Stephan Lewis, UN Secretary-General's special representative of for the African recovery program. Last June, the UN unanimously adopted a historic plan designed to help Africa work toward economic renewal. Initial signs are that the reforms are bringing some renewal, especially in nations such as Ghana, Ivory Coast, and Senegal.

Ghana began taking steps toward economic reform in 1983, well before the UN program was adopted. For the first time in a decade, Ghana has had three successive years of strong growth in per capita income, currently about 3 percent a year, according to the World Bank. The gross domestic product has risen about 6 percent on average in the past two years, the bank reports. It credits the change to reforms and good rains.

This is also a moment of ``desperation and anxiety,'' says Mr. Lewis, a Canadian. Although most Western donors support the need for the reform, some Nordic officials and some African leaders remain ``skeptical'' about their effectiveness.

Yet most African nations that have tried some version of African socialism, such as Tanzania, have little economic progress to show for it.

Africans currently feel that they have little choice but to go along with economic reforms as a way to get more international aid, since the major international lending agencies insist on the reforms in loan negotiations.

To make the reforms work, large amounts of additional international financial support must be provided at critical points throughout the reform steps. But there is no assurance that the amounts needed will be forthcoming from Western nations, warn UN and World Bank sources.

``We are in a very dangerous zone,'' says Jean Ripert, a top UN official. If enough funds do not flow into Africa now, during this reform period, the African nations will be ``in big trouble,'' he says.

The reforms, which these officials say are badly needed, involve major risks to the governments making them, African and Western analysts point out. ``They [the African leaders] are putting their necks on the line,'' says one UN official.

African leaders are worried that their countries might ``explode'' under pressure of the reforms, says another UN official.

Martin Adouki, an African spokesman at the UN, and the UN ambassador from Congo, says the reforms can ``menace the life of these regimes. Politically, these regimes can fall.''

Needed, says Ambassador Adouki, is more international assistance to help alleviate some of the high-risk social cost of the reforms.

The social costs include:

Higher food prices. By cutting government subsidies on food and thus allowing food prices to rise, governments hope to provide an incentive for farmers to produce more. This might make farmers happy, but, as prices rise, it can make urban and non-farming rural residents angry. There is also some concern that the rise in food costs would translate into higher prices for middlemen, rather than farmers, says Lewis.

Fewer federal jobs. Selling state-run industries to cut government expenses and make the industries more efficient means job losses. Ghana has laid off 29,000 employees in the state-run marketing board for its main export, cocoa, since the end of 1985. Only 10,000 are estimated, by the World Bank, to still be working on cocoa plantations that were once operated by the government but are now run by tribal groups.

Cutting the value of inflated local currencies. This makes the country's exports cheaper and more attractive to foreign buyers. But local residents find their money is suddenly worth very little. An urban resident may be hard pressed to rejoice at his nation's steps for long-range economic stregth when his pocket money is suddenly worth a fraction of its former value.

The urban and landless rural population are ``squeezed very hard'' by the reforms, says Richard Jolly, deputy executive director for programs for UNICEF.

In some countries, urban populations are having a hard time affording food, matches, candles, and other basic items, says Mr. Jolly. But, he adds, ``in many countries, the rural people are gaining by these reforms.'' And the reforms, he says, ``are needed.''

To help people during the reform period, he says, developed nations need to provide more assistance, such as food donated for work programs, help in building houses for slum dwellers, sanitary water projects, health clinics, and programs on nutrition for children and mothers.

World Bank officials and others point to cutbacks in United States bilateral economic aid as one of two key failures of the economic recovery program for Africa. The other is the failure of the international donor community and Africa to come up with a plan for debt relief.

Some African nations are actually paying back more on old loans than they are getting in new assistance. Debt repayments are a heavy burden for many African nations. Ghana, for example, is paying 60 percent of its export earnings on debt payments, says Lewis. More grants, and loans on easier terms, are needed, some officials say.

Lewis says that along with more foreign aid and debt relief, African nations need higher prices for their exports, such as cotton, coffee, cocoa, and minerals.

He is optimistic about aid and debt relief, but not about higher commodity prices, which are at about the lowest point they have been in 50 years, he says. International agreements to prop up prices have failed so far, though new negotiations are under way.

He says healthy Western economies are needed to be good buyers of African products at decent prices for the Africans. And an economically healthy African continent could provide good markets for Western products, Lewis says.

There is still skepticism among some officials, including a top African official at the International Monetary Fund and a World Bank economist, as to whether the African leaders have taken much action on reforms since the UN session.

But the US State Department recently reported that some 33 of 45 sub-Saharan African nations have ``undertaken significant reform measures since 1982.'' The report gives partial credit to the reforms for some of the increases in agricultural production over the past few years.